FX Monthly Chart Book

March was a particularly volatile month for the rand, influenced by both local challenges and global economic developments. While the rand was marginally stronger than the dollar by the end of the month, it lost against the euro and against the pound. It traded in a range of R18.00/$ – R18.70/$ in March. Emerging market currencies staged a mixed performance against the dollar in March: the RUB, CZK, PLN, RON and HUF were amongst the best-performing ones; the TRY, TWD, ARS, KRW and COP were amongst the worst-performing EM currencies in March. 

Uncertainty around President Trump’s trade policies has seen the rand remaining volatile against the dollar in March and into April. Uncertainty around global trade policies dominated in March, with the Trump administration indicating that reciprocal tariffs would be implemented from April. President Trump announced a minimum 10% tariff on all exporters to the US. He noted that several countries with the largest trade imbalances would face even higher rates. President Trump announced 30% reciprocal tariffs for SA imports. China will face a 34% tariff, Japan 24%, while the European Union will have a 20% levy and Vietnam is due to pay a 46% tariff. President Trump repeated that the US would impose a 25% tariff on all foreign-made automobiles. Several of the US’s trading partners (Asian, European and North American countries) are considering possible retaliatory and countermeasures following the announcement of the sweeping tariffs. China has announced duties of 34% on all US imports in retaliation. The Trump administration has since signalled that it would not back down from the aggressive trade policies despite global recession fears. The SA government, however, noted that it would not rush into imposing reciprocal tariffs on imports from the US as it would be ill-considered and counterproductive.

The rand was also affected by the postponement of Budget 2025 in February, which came on the back of a disagreement amongst parties within the Government of National Unity (GNU) to implement a 2 percentage point increase in the VAT rate. Budget 2025 was tabled in March. Treasury will now phase in a 1ppt VAT rate increase over two years. VAT was chosen as the funding source for spending pressures as it is deemed the least harmful (tax increase) to economic growth. Treasury estimates that the 0.5ppt VAT hikes in 2025 and 2026 would lift average consumer inflation by around 0.15ppt in 2025 and 2026, while lowering economic growth by around 0.07ppt. The fiscal framework has now been adopted. However, the rand remains vulnerable on the back of uncertainty around the functioning of the GNU. The rand also came under some pressure, earlier in March, when Eskom announced that it would implement loadshedding, albeit short-lived.

The rand is weaker against EM peers, but still at least 5% away from previous crises. We have modestly weakened our exchange rate forecasts on the back of domestic political uncertainty around the stability of the government of national unity (GNU), with the DA’s departure from the GNU as likely and a major concern, as well as the tariffs imposed on SA that has already seen the rand weakening (see GNU and tariff complications, dated 7 April 2025). We see the rand ending the year at R18.40/$.

For 2025, we forecast the rand to average R18.51/$, R20.00/€, and R23.81/£.